Retirement
Hi Terry, when I retire, will my IRA and Social Security income be subjected to Federal and State taxes in Illinois.
Terry Says
Withdrawals from your IRA or 40l(k) or other pre-tax retirement program will be taxable as ordinary income. (If you have a Roth IRA, then the money is withdrawn free of taxes.)
If you retire before your full retirement age, a portion of your benefits will be penalized depending on your income level.
After you reach full retirement age, your SS benefits are not penalized no matter how much additional income you have — either from work or investments. However, half of your Social Security income will become taxable if you have additional income that puts you over certain limits. Those taxable levels depend on your marital status, and whether your spouse is retired, and your filing status. Here’s a link to a good description of the rules. BUT, I suggest you consult your own CPA (or Turbo Tax live) to see how you might be impacted.
As of this writing, Illinois does not place an income tax on retiree benefits. But that is currently under discussion to remediate the state’s budget gap!
